Insurance companies, like most, were taken by surprise with COVID-19. Their models, data, and systems, curated for decades or centuries and fiercely protected, simply did not and could not factor in how a global pandemic would affect their customers. Now, they face a world with restrictions they did not expect.
Let’s consider recent events related to commercial insurance in the restaurant industry, for example. A group of about 50 New York City restaurants sued their insurers for hundreds of millions of dollars. The restaurants argue that they sustained income losses and direct physical losses from the pandemic, which forced them to reconstruct their properties to adapt to restrictive reopening rules. The insurance companies disagree on potential coverage under the commercial property policies, citing that coverage definitions put in place before the pandemic, or its implications, were widely understood.
Now, consider the damages that were caused by the pandemic. Restaurants had to invest in revamping their spaces to meet new codes and regulations. This can be interpreted as “damages.” But an insurance company might argue this is outside the scope of what was originally considered as damages when the policies were written and signed. What about the civil unrest and demonstrations that occurred during the summer of 2020? Restaurant windows were broken, inventory was stolen — is that covered?
This scenario can be replicated across nearly every industry. Healthcare insurers are struggling to evaluate the long-term health effects of COVID-19 based on ever-changing data. Life insurance policies are being re-evaluated as insurers struggle to determine how COVID-19 fits into the underwriting policy. And the aviation insurance industry is evaluating the reduction of liability premiums due to the significant decrease in passengers and travel altogether.
Digital Acceleration and Changing Data Collection Models
The traditional methods used to gather data in insurance, visits by a claims adjuster to inspect damages, and in-person doctor appointments, are impossible in a pandemic. The historical data that was the basis for so many decisions, and the models that were developed on that data, now seem irreconcilably out of date. No one knows if things will go back to pre-COVID patterns or if there will be a new normal. Insurance companies are dealing with a more complicated landscape that is simultaneously evolving, and rife with uncertainty. To add fuel to the fire, the recommended social distancing measures and stay-at-home orders have quickly necessitated a new approach to customer interactions.
These challenges have opened up a world of possibilities to reimagine insurance. After all, at its core, insurance is a data business. The entire business boils down to the accurate assessment of risk through data. Health data. Financial data. Environmental data. COVID-19 has taken away the traditional ways of gathering that data, but digital transformation offers insurance companies new ways to fill the void and even improve on previous models.
Instead of in-person appointments or walkthroughs, insurance companies are exploring drone footage, satellite imagery, social media posts, and mobile apps that gather data on customers. Using these forms of structured and unstructured data can unlock new insights, both in isolation and in combination with each other.
For example, an estimated 200 million physicians, scientists, and technologists are currently using massive amounts of data to work on solutions in the fight against COVID-19. AI and advanced algorithms are being used to derive insights from all sorts of new data sources to identify at-risk populations, control the spread, and deliver a vaccine. And the approach extends to insurers. Those debates about which conditions are included in a COVID-19 diagnosis are aided by large-scale analysis of aggregated medical records, streamlining billing processes to cut costs and improve reliability.
It’s much easier said than done to utilize this new data. For traditional on-premises data management systems, the more types of data that need be analyzed, the more expensive and slower the system can become. With new types of data being added all the time, that quickly becomes cost-prohibitive and cumbersome. The quite often older, legacy, data management systems many insurers use are just not ideally suited for unstructured or streaming data and real time analytics.
The evolution of cloud technology can help. The cloud can store structured and unstructured data, flexing to allow new types of data, processes, and models based on real-time analytics to be spun up and scaled faster than ever before.
Unrestricted by storage or processing power, the cloud is agile enough to support new business models. Should an insurer offer discounted monthly rates to commuters now working from home? Or increase home insurance premiums for the same work from home folks? Offering such real-time insurance means juggling the processing and coordination of data from multiple sources, live, but the benefits are palpable. With new streams of data, being gathered and analyzed in near real-time, insurers can offer more personalized, timely, and relevant services than ever before.
Aside from providing speed and agility, solutions built for cloud deployments provide the security and safety required to protect data. Heavily regulated industries like insurance can benefit from the ability to adjust to new and evolving laws, like GDPR, CCPA or HIPAA, with a full chain of custody for all data.
Digital acceleration and the power of the cloud has the ability to transform the insurance industry with a more efficient, secure and streamlined approach to data analytics. According to PwC’s 23rd Annual Global CEO Survey, 42 percent of insurance CEOs are prioritizing intelligent automation (including data and analytics capabilities, as well as robotic process automation) over the next 12 months.
As we look ahead to a world that has learned from COVID-19, rather than simply coping with it, many things are still uncertain. Perhaps the least uncertain of those is the transformative role the cloud is playing in facilitating the evolution of Insurance. While the waters may still be uncharted, they’re less daunting during COVID-19 than at any other time, as an entire industry makes giant leaps toward digital transformation. What started out as a forced evolution may actually become the driving force in the insurance revolution.
